2015 Scheme example presentation

The new 2015 NHS Pension Scheme
–
Information for members
A presentation for NHS
Trade Unions 22
October 2014
James Davenport /
Stephanie Leary
Who will join the new scheme?
• Who will join on 1 April 2015?
•
•
existing members with no protection
new joiners on 1 April 2015.
• Who will join after 1 April 2015?
•
•
new joiners after 1 April 2015
members with tapered protection.
• Who will not join?
•
existing members with full protection.
Do you have protection?
• You have full protection if: you were within 10 years of your normal
pension age (NPA) as at 1 April 2012. You will remain in your current
section until you retire or otherwise leave the scheme and will not
move to the 2015 scheme.
• You have tapered protection if: you were more than 10 years, but
less than 13 years and 5 months from your NPA as at 1 April 2012 .
You will move to the new 2015 scheme at a date later than 1 April
2015.
• You have no protection if: you were more than 13 years and 5
months from your NPA as at 1 April 2012. You will move to the new
2015 scheme on 1 April 2015.
Pre- 1 April 2015 benefits
(1995/2008 sections):
• will remain in the 1995 or 2008 section as appropriate
• will be treated separately and calculated in accordance with
section rules
• will be based on the members final salary in accordance with
scheme rules [provided there is no break in pensionable
employment of 5 years or more]
• some 1995 section members will still be eligible for protection of
pay in accordance with the current rules.
What happens to members who
want to re-join the scheme?
• members re-joining on or before 31 March 2015 will be assigned
to the relevant section of the current scheme (1995/2008)
• NHS Pensions will determine whether protection arrangements
apply
• the member will move to the 2015 Scheme on 1 April 2015 or
later as appropriate.
What about new members?
• new members joining on or before 31 March 2015 will join the
2008 section and will move into the 2015 Scheme on 1 April
2015
• a membership of less than two years in the 2008 section will
link with 2015 Scheme membership to achieve 2 years
membership and avoid a refund of contributions
• new joiners on or after 1 April 2015 will automatically join the
new 2015 Scheme.
2015 Scheme features
•
pension is based on actual earnings in each scheme year
•
pension builds up at a rate of 1/54th of actual pensionable
earnings in each scheme year
•
no limit on the number of years membership
•
pension built up is revalued each year to maintain a link to
inflation
•
final pension is calculated by adding together each year of
the revalued pension.
Member contributions
Tier
Pensionable Pay
(whole- time equivalent)
paid in 2013/14
Contribution Rate in 2015/16
1
Up to £15,431.99
5.0%
2
£15,432.00 to £21,387.99
5.6%
3
£21,388.00 to £26,823.99
7.1%
4
£26,824.00 to £47,845.99
9.3%
5
£47,846.00 to £70,630.99
12.5%
6
£70,631.00 to £111,376.99
13.5%
7
£111,377.00 and over
14.5%
Please note: the employer contribution rate is 14.3%.
2015 Scheme: Salary Sacrifice
•
you may have chosen to give up or ‘sacrifice’ some of your salary each
year for a non-cash benefit such as a care hire scheme or childcare
vouchers
•
these arrangements are known as salary sacrifice
•
in the new scheme, pension benefits are calculated using your pensionable
pay from each year of membership, not just your pay near retirement
•
therefore salary sacrifice arrangements will impact the amount of pension
you build up
•
you need to consider this impact against the benefit of the savings you
currently make through your membership of a salary sacrifice arrangement.
2015 Scheme:
Breaks in membership
Breaks of five years or less:
• periods of membership can be linked for breaks of five years or less
• where there is a link in membership, any pension benefits earned
prior to the break will be revalued, currently by Consumer Price
Index (CPI) + 1.5 per cent.
Breaks of more than five years:
• any pension earned prior to the break becomes deferred (providing
it is sufficient to qualify for pension benefits)
• at retirement, these benefits are revalued by adding a pensions
increase which is currently CPI only.
2015 Scheme:
Transfers in and transfers out
Transfers in and out of the 2015 Scheme will be possible
but there will be some changes:
• from 1 April 2015 a transfer out to a Defined Contribution
(DC) pension scheme will not be allowed
• transfers into the 2015 Scheme will usually be treated as
a monetary amount of ‘pension credit’ and will be eligible
for revaluation.
When can 1995/2008 benefits be
claimed?
Existing 1995/2008 section benefits can be taken in line with
current rules, at your existing normal pension age (NPA):
• 1995 section NPA = 55 (special class status) / 60
• 2008 section NPA = 65.
If a member returns to NHS employment following receipt of
pre-2015 benefits, the following applies:
• if the member has any 1995 section benefits, they cannot
build benefits in the 2015 Scheme
• where the benefits were in the 2008 section, further
pension benefits can be built in the 2015 Scheme.
When can 2015 benefits be claimed?
• the same time as any 1995/2008 benefits with a reduction for
early payment
• at the members normal pension age in the 2015 Scheme
• on any date between the above two options with a reduction
for early payment if appropriate
• a member may take their 2015 benefits, return to NHS
employment and start building a new pension, providing they
are under age 75 and not in receipt of 1995 section benefits.
Retirement flexibilities
The 2015 scheme will have the same flexibilities as the 2008
section of the current scheme alongside a new feature called
Early Retirement Reduction Buyout (ERRBO).
The flexibilities are:
• step down
• wind down
• retire and return
• draw down
• late retirement enhancement
• ERRBO.
You can find out more by reading the Working Longer Group
employee factsheet.
New feature
Early Retirement Reduction Buy Out - members can pay additional
contributions to eliminate or lower the cost of taking early retirement
•
•
•
•
•
restricted to a maximum of three years before normal pension age
and not before age 65
amount of buy out may be restricted if additional pension
contributions are also being paid
the amount of additional contributions to buy an ERRBO depend
on:
- members age at the start of the contract and
- the number of years being purchased.
for a reduction buy out of 3 years the additional contributions range
from 3.6 per cent at age 20 to 4.7 per cent at age 60
additional contributions are payable up to the chosen early
retirement age.
2015 Scheme: New feature
ERRBO example:
•
Greg has a normal pension age of 68.
•
He is not buying additional pension but takes out an agreement to
purchase an ERRBO of three years in April 2015 at age 45.
•
Greg pays additional contributions until age 65 when he retires and
claims his pension.
•
The normal deduction that would apply to the pension being paid 3
years early is eliminated by the buy out and Greg receives his pension
in full.
•
To achieve this Greg will have paid additional contributions of 4.1 per
cent, before tax relief, in addition to his normal tiered rate contributions.
2015 Scheme: Ill health retirement
• if an application is made before a member is due to move to the
2015 Scheme then the member will remain in their existing
section until the result of their application is known or until all
appeal avenues have been exhausted
• if the application is successful, the benefits will be calculated
under the relevant existing section rules
• successful applications under the 2015 Scheme will be:
•
tier 1 – the value of the pension benefits already built up paid
without reduction for early payment but without any
enhancement
•
tier 2 – the value of pension benefits already built up plus an
enhancement known as the ‘tier 2 additional amount’.
Special Class Status
& Mental Health Officer members
• there is no Special Class Status or Mental Health Officer status in
the 2015 Scheme
• if a member has either of these status now they can keep the right
to claim their 1995 section benefits subject to existing criteria
• if a member had Mental Health Officer Status and could have
qualified for ‘doubled years’ then a special calculation at
retirement, know as Uniform Accrual, will be made
• more information about all this can be found on the NHS
Pensions website.
Questions